Overcome Your Rough Financial Situation in 5 Steps

January 28, 2018

Are you one of the 61% of Americans that would be unable to cover a $1,000 emergency expense with savings?

Not everyone is handed a silver spoon in life or happens to be a “trust-fund” baby. There are also circumstances and decisions in life that lead us down a financial path that isn’t where we want to be. But, sometimes we need to hit rock bottom before we can rise to the top.

My story started out really rough financially. You know how most people are supposed to go to college, get a great paying job, and start saving up money so they can afford the house, car, and family? My life happened in a different order. Two kids first, then marriage, then college a month after marriage, one year later a house, and a few cars. Last was a job. Paycheck to paycheck was our life.

When we did manage to make ends meet by busting our tails, we didn’t necessarily make the best financial decisions. At times, we lived by the terrible motto of “I can buy anything when I want it because I deserve it”, regardless of whether or not we had the money for it. Because of having a family to support very early on, taking on multiple forms of debt, and a good dose of poor money management, we became submerged in $225K worth of debt through mortgages, car payments, student loans, and credit card debt in a remarkably short period of time.

How does one swim to the top and become debt-free? I’ll share the 5 major things that had to take place for us to make that happen.

1. Admit that you’re not where you want to be in your financial life

This is the hardest step. It’s not easy to admit that life is difficult or that you made some really terrible choices that landed you in the rough spot you’re in. It also doesn’t happen overnight, so realizing that you’ve been making these choices for far too long is also challenging. The really sucky thing is knowing all the money you’ve thrown away on things you didn’t need, couldn’t afford, or were really stupid to buy.

Maybe you have regrets that you didn’t finish your college degree or that you should have gotten that certification so you could have made more money. Maybe you had that really great business idea that you didn’t pursue and watched someone else do it instead. Whatever the case, just admit that this is it. You can’t and won’t take it anymore. And that things need to change. By the way, if you are married, you can’t do it alone so you’ll need to go through this process with your spouse.

2. Determine that you want to change your bad financial situation and that you’ll do whatever it takes

The is the most important step. If you don’t determine that you want to change your life and that you’re 100% committed to making the change, it simply won’t work. If you have a spouse, they will also need to make this very same commitment. We went from two separate accounts down to one. We had to have that commitment and accountability and make decisions as a team.

Sacrificing now for the short-term is incredibly important for long-term success. If one or both of you are unwilling to delay gratification, it won’t work. It pains my husband and I to spend money and we cringe when we hear someone taking out a loan to buy a new car. We have zero desire to join in the debt-club and are fully committed. Things won’t change until you get to this point.

3. Figure out what caused you to be in this bad financial place and change it

Circumstances and poor choices got us into our debt mess, but there are five other issues that were at play that impacted our spending habits and financial decisions in life.

Lose the Entitlement Attitude

As much as I hate an entitlement attitude, it was one of the things that caused us financial issues. We “deserve” these new clothes. I “deserve” satellite radio in my car. We “deserve” to go out every weekend. Now everyone needs little rewards here and there, but thinking that we deserve anything and everything we could ever want and desire is just stupid.

Become Accountable to Someone

My husband and I had separate checking accounts, so it was easy to spend money on things without the other one knowing. This was a big problem. We thought we both deserved to treat ourselves with our hard-earned money instead of working together to build wealth and plan for the future. Ugh. This is even hard writing about because I now know how incredibly wasteful and counterproductive this was.

Quit Keeping up with the Joneses

I used to care about what people think and therefore felt I needed a “cool” car to drive and “cool” clothing to wear. Don’t get me wrong. I don’t like to look like a hot mess and drive a rusty clunker around, but I certainly don’t give a rat’s rear end what the Joneses are doing or have. If someone doesn’t like you because of the car you drive or the brand of your shirt, how about you reconsider their value in your life. Make sure that you surround yourself with people that will encourage you to make good financial decisions in life.

Look for a Cheaper Alternative

Do you really need the $31,000 new car or can you find one used that is just as reliable for $15,000. There are generic brands for groceries and other basic goods, coupon codes to get an online discount, and sites like E-bay to purchase like new goods for a fraction of the cost of something new. Your fancy Starbucks coffee, cable TV, gym membership, eating out, and more all have a cheaper alternative. Want to save over $9,000 this year? Check out 8 ways to save some serious cash.

Find Additional ways to Make Money

When you realize the value of multiple income streams to pay off debt, save more money, and achieve financial freedom, it’s seriously a light-bulb moment. Most people think that showing up to work and then heading back home is it. It can be if you make a killing, but if not, you need to look for additional ways to make money. Right now, my husband and I have six different streams of income and are consistently on the lookout for additional opportunities. This, my friends, is how you get ahead, how you build wealth, and how you build the life you want. You can start a business, start a blog, or find a side hustle to help you make more money today.

4. Visualize and write down where you want to go in life – DREAM!

Nothing motivates like dreaming. Our dream? To live life on the beach in the Caribbean – debt free of course. We dream about this daily. We have pictures posted around the house, we text each other about our dreams when apart, and we talk about it a lot. If you don’t have a goal to work together on, it becomes hard to get excited about your financial freedom journey. We now work together to live a simpler life, save money, sell things we don’t need, make money through multiple income streams, and all with excitement and vigor. Don’t get me wrong; it’s tough work. It takes sacrifice, time, energy, and hard work. But that’s the point! Find your dream and write it down, post reminder pictures, and talk about it all the time.

5. Set your long-term goal or goals and then break it down into bite-sized pieces

When you know how much money you need and when you need it by, it becomes much easier to break it down from there. Let’s say that you want to purchase a piece of pristine beach land for $500,000 with cash in 20 years. You will need to find a way to make and save $25,000 per year to dedicate solely for this purpose. Still in debt? It works the exact same way. Let’s say that you’ve got $225,000 in debt and want to become debt-free in 10 years. You need to find a way to make and pay roughly $22,500 per year to achieve your goal. I’ve recently found a way to save over $18,000 so check out my financial tips for this and other ways to save.

However you arrived at your current financial place in life doesn’t mean that you have to stay there. Let go of the bad habits that are dragging you down and find a way to improve your situation. There is always a way out and there is always a better way. Are you ready to change your life? Check out these ways to save money today.